This is something I've argued quite a few times. To start, the story is better in Phantom Menace, the acting is acceptable (overall), the music is the best of PT, and the flow/pacing of the film actually works (in a hyperactive, sugary way). After that, it starts getting more complicated.

I can totally understand why some people hate this movie. First, likable characters are perhaps the most important facet of any good movie and while Obiwan and Qui-gon were likable, the rest of the characters were pretty hollow and Jar Jar is downright obnoxious. Second, the film is filled with a lot of childish humor and condescendingly small presentations. All in all, we're left with a film that could potentially be very juvenile and obnoxious. I think one of the reasons I can enjoy Phantom Menace is because I'm able to not let those things bother me: I can generally ignore them just fine and even chuckle if I'm in the right mood.

To finish, I'll just say that this movie works with George Lucas' strengths. It doesn't deal with emotion very much, its fast paced and uncomplicated with its ideas, and its fairly epic in the way it pits good versus evil. While the film ignores and ruins many, key, Star-Wars concepts (and therefore I can't really call it a good "Star Wars" film), it still captures that Star Wars feel (better than any of the prequels did) and I like that a lot. In the end, I'll say its a movie that's good in its own weird way.